The Fuse
Equity futures are bouncing around but well off their best levels from last evening. President Trump delivered a State of the Union Tuesday evening that initially inspired buyers to come out and buy stocks. That may have been a bit optimistic.
Interest Rates are slightly higher as the 10 yr hovers near 4.2%. Fed funds futures are now predicting 3 rate cuts in 2025, a very optimistic view that is unlikely to occur.
Stocks in Europe jumped 1.3% on heavy turnover as France and Germany pushed up by more than 1.8%. The US dollar fell .3%, crude oil is down sharply and is trading under $67, gold is about flat while nat gas is extending. German 10 yr bund yields rose sharply, up 19 bps while US treasury 10 yr yields were flat.
Stocks in Asia were higher, Japan up .2%, Hang Seng up 2.8% while Shanghai was up .5%.
Earnings last night were good by Crowdstrike but not good enough. Credo beat and raised guidance, this morning a miss and lowered guidance by Foot Locker and ANF. Tonight we hear from Marvell, Zscaler, MongoDB, Veeva and Victoria’s Secret.
Another dose of heavy selling that brought the markets to some lower technical levels that seemed to attract buyers. Still, some damage to the chart cannot be ignored, even as the Nasdaq pivoted off the 200 day moving average to close just modestly lower. For a time, the Nasdaq was higher by about .5% but a late day smash of selling nixed those gains. The market is quite volatile here and any gains can be wiped away in a manner of minutes, like yesterday. .
Breadth was horrendous early in the day but did manage to finish off the worst levels, but that was of no consequence. This indicator has bee showing itself lately that the market is in trouble, and that has spilled over to other indicators. Oscillators are oversold but not extreme (ridiculous) yet, so we could see a bit more down but the probabilities are starting to turn the other way. New lows crushed new highs again, remains on a sell signal.
Does a reversal on high volume count as a positive day? For some the answer is yes, but in most cases we might want to see followthrough. The heavy selling early in the morning has a ‘panic’ feel to it, while buyers slowly came back into the game midday but price action was not looking for more upside as the sellers came out hard once again.
We continue to probe lower lows to see if we can find where buyers lurk, we may have found it today. There was a huge selloff early in the day, the SPX 500 fell roughly 5740 and did an about face, Nasdaq also picked around the 200 day moving average for the first time in months and rallied. We’ll need a few days to pass to make sure Tuesday’s lows are firm.
The Internals
What’s it mean?
I would like to draw your attention to the put/call, which spiked the other day and fell back. A move above 1 is often a sign of oversold, we’ll see if that holds. Also, the ticks, which were red in the am turned green later on. A bottom is in? Perhaps, but we need more days to figure that out. VOLD was weak while ADD was miserable, the VIX shot up, then down and then right back up. Lots of uncertainty.
The Dynamite
Economic Data:
- Wednesday:ADP, S&P global services final, factory orders, ISM services, Beige book
- Thursday:Jobless claims, Q4 productivity, trade deficit, inventories, fed speak
- Friday:January labor report, wagers, consumer credit, lots of fed speak
Earnings this week:
Fed Watch:
Last week’s data was shockingly poor, but at some point the economy is going to need to cool down. Most fed speakers last week talked about the cautionary tale of high inflation on the economy, they are in no rush to pour gasoline on the fire. We’ll hear more this week of the same, the next fed meeting is likely to be met with no change in policy, but further meetings dictate this, too.
Stocks to Watch
Retail – A heavy week of earnings from retail names, not the biggest ones like last week but more concentrated in niche areas. We saw a bit of weakness in the consumer reports last week and the prior week (spending, retail sales) so it would not surprise us to see a few misses, but it’s all about the guidance.
Costco and Target will lead the way.
VIX – Market volatility has been rising up lately due to some increased uncertainties. When there is worry about the future that is when volatility rises, ranges expand and option premiums rise. If we experience a steady down move in volatility we will know the trend up has continued.
Mag 7- The last of this group delivered earnings last week (NVIDIA) and no surprise the ‘7’ are relatively poor performers. But, with a new month starting perhaps money flows will start to return to this group.
